30.09.2022: Provisional Attachment Order Passed Ignoring The Basic Ingredients Of Section 83 Of The CGST Act, Is Arbitrary And Illegal – Cost Imposed On the Officers – Allahabad High Court

Allahabad High CourtThe Hon’ble High Court of Allahabad vide its order dated 29.08.2022 in the matter of Varun Gupta Vs. Union of India and Another in Writ Tax No. – 858 of 2022, set aside the provisional attachment order attaching the bank accounts of the assessee, without following the provisions and ignoring the basic ingredients of Section 83 of the Act.  Further the Hon’ble Court also imposed the cost on the concerned Commissioner while disposing of the matter for acting in    Arbitrary and Illegal manner.

The Petitioner filed the writ petition before the Hon’ble High Court praying for quashing order dated 19.05.2022 passed by the respondent authority directing provisional attachment of the bank accounts of the petitioner and his firm.

Facts: –

  • The petitioner is a proprietor of M/s. S G Plastic Industries, B-19 Roop Nagar Industrial Area, Loni, Ghaziabad, engaged in manufacturing of plastic granules and its compounding.
  • That earlier, the bank account of the petitioner was attached, against which the petitioner preferred Writ Tax No. – 448 of 2022 and the Writ petition was allowed by order dated 11.05.2022 on the ground that no proceeding under Section 74 was pending as on the date of attachment. It was also found that amended provision of Section 83 was not available when the attachment order was passed.
  • Consequently, the respondent authority passed an order dated 18.05.2022 intimating the Bank that the attachment, however, on the very next day went on to pass the impugned order 19.05.2022, again attaching the bank account (No. 916010071529025) of the petitioner with Axis Bank.

Held: –

  • The Hon’ble considering the submissions and facts of the case, found that the impugned order mentions that the proceedings under Section 67 and Section 74 of the Act has been launched, though, it was admitted on the behalf of the respondents that ‘no proceedings under Section 74 of the Act has yet been initiated’
  • The Hon’ble Court after perusal of its order dated 14.07.2022, found that this Court in the said order referring to the judgment of Hon’ble Supreme Court in the matter of Radha Krishan Industries Vs. State of Himachal Pradesh and others (2021) 6 SCC 771, had observed “Despite being repeatedly asked by us, learned ASGI and learned counsel for respondent no. 2 could not produce any opinion of the respondent no. 2 before this Court under Section 83 of the CGST Act, 2017 indicating that the Commissioner has recorded his opinion on some materials that it is necessary to attach the bank account of the petitioner to protect the interest of revenue.”
  • Thereafter the Hon’ble Court taking note of the ratio laid down in Radha Krishan Industries Vs. State of Himachal Pradesh and others (2021) 6 SCC 771 and the law stated in Section 83 of the Act, found that following expressions have been used in section 83: – (i) Commissioner is of the opinion; (ii) that for the purpose of protecting the interest of the Government revenue; (iii) it is necessary so to do; (iv) by order in writing, attach provisionally; (v) in such manner as may be prescribed.
  • Thereafter, it was found by the Hon’ble Court that plain reading of Section 83 leaves no doubt that firstly, there is necessity of the formation of opinion by the Commissioner; secondly, the opinion must be formed before ordering a provisional attachment; thirdly, the opinion must indicate that it is necessary so to do for the purpose of protecting the interest of the government revenue; fourthly, the order must be in writing for the attachment of any property of the taxable person; and fifthly, observance of the Rules by the Commissioner in regard to the manner of attachment.
  • Further, the formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue. The expression “it is necessary so to do” clearly evidences an intent of the legislature that an attachment is authorized not merely because it is expedient to do so but because it is necessary to do so in order to protect interest of the government revenue.  Thus, a more stringent requirement than a mere expediency, has been provided in Section 83. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power.  This requires the existence of tangible material before the Commissioner so as to enable him to form his opinion for provisional attachment.  Each of the afore-mentioned ingredients of Section 83 must be strictly applied and complied before a provisional attachment on the property of an assesses can be made.  Therefore, the impugned order is not sustainable as it has been passed by the respondent authority arbitrarily exercising its power and ignoring the aforesaid ingredients of Section 83 of the Act.
  • The Hon’ble Court after perusal of paragraph 11 of the judgment in case of Radha Krishan Industries (supra), found that the facts of the order impugned in the present writ petition to the order which was impugned before the Hon’ble Supreme Court in the case of Radha Krishan Industries (supra) which has been quashed by Hon’ble Supreme Court.  Hence, the impugned order cannot sustain and is liable to be quashed with exemplary cost.

Lastly, the Hon’ble Court taking reference of the judgment in the case of Punjab State Power Corporation Ltd. vs. Atma Singh Grewal, (2014) 13 SCC 666, wherein the Hon’ble Supreme Court ‘stressed that cost should be in real and compensatory terms and not merely symbolic. It further expressed the need to recover the cost from erring officers,’ set aside and quashed the impugned order dated 19.05.2022, passed under Section 83 of the Act and allowed the Writ petition with cost of  Rs 50,000/-, to be paid by the respondents to the Petitioner within two weeks.

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